Business News/ Markets / Stock Markets/  Brokerages bullish on this cement stock, expect shares to gain up to 21%
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Brokerages including Emkay Global, Motilal Oswal, Axis Securities and Sharekhan have reiterated their 'buy' call on Dalmia Bharat Ltd, considering its strong growth potential led by capacity additions. Their target prices on the stock range between 1,750 and 2,260, implying an upside of up to 21 per cent from the current market levels. Dalmia Bharat shares closed at 1,858.90 on Monday. The stock was trading 1.73 per cent lower at 1,836.95 apiece on Tuesday.

Here's what the brokerages have to say:

Axis Securities

Dalmia Bharat continues with its strategy of exiting non-core business/investment. In line with this strategy, it has entered into a binding agreement to sell the entire investment of 1,87,23,743 equity shares of 10 each (42.36% of share capital) of Dalmia Bharat Refractories Limited at a consideration of 800 crore.

Cement demand remains robust and the brokerage expects it to grow at 7%-8% CAGR over FY22-FY25E. The increased government Capex on infra and housing remains the key growth driver along with robust real estate demand.

The stock is currently trading at 10 times FY24E and 9 times FY25E EV/EBITDA and an attractive EV/tonne of $90 and $87 respectively.

The brokerage maintains a 'Buy' rating on the stock and value it at 11 times FY25E EV/EBITDA to arrive at a target price of 2,260 per share from 2,120 per share earlier, implying an upside of 21 per cent.

Motilal Oswal

The brokerage estimates the company's net cash, including investment in IEX, to be at 4.1 billion in FY24 as against an estimated net debt of 2.4 billion earlier. This will lead to EPS of 47.6 in FY24E versus 47.1 earlier. Motilal Oswal values Dalmia Bharat at 12.5 times September 24E EV/EBITDA to arrive at a target price of 2,155 from 2,120 earlier. "Reiterate our Buy rating on the stock," it said.

Emkay

Dalmia Bharat's board has approved the sale of its entire 42.36 per cent stake (owned through its subsidiary) in Dalmia Bharat Refractories (DBRL) to Sarvapriya Healthcare Solutions Private Ltd for 8 billion. The said transaction is largely in line with the company's strategy of making Dalmia a pure-play cement company and exiting the non-core business/investments. The brokerage has a ‘Hold’ call on the stock with a target price of 1,750.

Sharekhan by BNP Paribas

Dalmia continues to remain focused on its growth plans and adhering to its commitment of divestment of non-core assets balancing growth while maintaining its balance sheet health. The company remains committed on growing its capacity at a 14-15 per cent CAGR over the decade to reach 110-130 mtpa capacity by 2031 with a target net debt to EBITDA below 2 times.

The company remains focused on being a pan-India pure play cement company with a significant presence in every market, wherein it operates over the long term.

Dalmia is currently trading at an EV/EBITDA of 12 times/11 times its FY2024E/FY2025E earnings, which we believe provides further room for upside, considering a 17 per cent CAGR in net earnings over FY2023E-FY2025E. Hence, the brokerage has retained its ‘Buy’ rating with an unchanged price target of 2,250.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 28 Mar 2023, 12:30 PM IST
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